May 10, 2023

Shareholder Proposals: No-Action Stats & Reminders

At the recent Spring Meeting of the ABA’s Business Law Section, Corp Fin Chief Counsel Michael Seaman noted that the height of “shareholder proposal season” has concluded, from the Staff’s perspective. Michael shared these stats:

– The Staff was asked to respond to 177 no-action requests this year. That’s a significant drop from last season where the Staff reviewed 235 requests.

– This year, the Staff granted 46% of those requests, and that’s an increase from around 30% last year. 35% percent of the requests were denied and about 20% were withdrawn.

– 14a-8(i)(7) – the “ordinary business” exclusion – was the most frequent basis that the companies have asserted in their no action requests, and that is typical every year.

– This year, “procedural” requests were up significantly (requesting no-action relief on the basis of requirements like ownership, providing the company with dates and times to meet with them to discuss the proposal, etc.). Last year, the Staff saw 42 procedural requests. This year, there were 53 – despite the lower number of overall requests.

When it comes to the meaning behind these numbers, we can’t know for sure what goes on behind closed doors at every company receiving shareholder proposals, but the numbers track with the sentiment that I blogged about earlier this year: that 2023 is “The Year of the Compromise.” Even as the number of proposals submitted by proponents has remained high, companies recognize that the path to no-action relief is challenging under SLB 14L, and may have been more judicious in submitting requests to Corp Fin (instead, negotiating with proponents could be the better approach). And, the no-action requests that were submitted may have been stronger due to the increased level of vetting at the decision-making stage. As we all know, it is all very case-by-case.

For procedural requirements, Michael emphasized that “proof of delivery” – whether or not a proposal was received or responded to – has become an important issue in the age of email correspondence. Here are a couple of reminders that can help save time & headaches:

– The Staff’s no-action responses this year make it clear that things like taking a screenshot of an email that you sent somebody is not proof of delivery. Make sure to review SLB 14L for guidance on proof of delivery in the email context.

– Generally speaking, companies and proponents owe it to one another to confirm receipt by email of any message received from the other side. If you have sent a message and don’t get a receipt, then follow up.

Liz Dunshee